Stock market investors, Managerial Economics

A hypothetical AD-AS model for Canada

During the 1990s, many stock market investors in Canada became optimistic about information technology and bid up stock prices, more those of high-tech companies; this was referred to as the "dot-com bubble." Though, when the new technologies started to appear less profitable than they had originally seemed, investment spending fell and the prices of many stocks fell sharply, wiping billions of dollars from investors' accounts. For example, from September 2000 to September 2001, the price of Nortel stock fell from more than $120 to less than $10. The stock market crash decreased Canadian household wealth and, in turn, consumer spending. Show graphically the effects of this stock market crash on the short-run macroeconomic equilibrium.